Companies Act, 71 of 2008 Series Part 4: Board meetings

Introduction

The Companies Act, 71 of 2008 (“the Act“) expressly provides that the business and affairs of a company must be managed by or under the direction of the board of directors (“the Board“), which has the authority to exercise all of the powers and perform any of the functions of the company. This general authority of the Board is curtailed by other provisions of the Act and may also be limited in terms of a company’s Memorandum of Incorporation (“MOI“). Following on from our previous article that dealt with shareholders’ meetings, this article explains the purpose and importance of meetings of the Board by deconstructing them under three basic questions: “Why, When and How?“.

Why?

The directors of a company are required to exercise their powers to ensure effective management of the company by passing resolutions at meetings of the Board. These meetings must be properly convened – meaning that notice of the meeting must be given to each of the directors and a quorum must be present before any meeting may commence or any matter may begin to be considered. See “How?” below for more information regarding the notice and quorum requirements.

Given that directors hold a fiduciary position to exercise duties of care, skill and diligence towards the company, to act in the best interests of the company and not their own financial interest (as opposed to shareholders who are entitled to act in their own self-interest), Board meetings are subject to far less regulation in the Act than shareholders’ meetings. As directors are expected to have a level of qualification and experience, the Act is not overly prescriptive with regard to the manner in which Board meetings are convened and administered.

When?

A Board meeting may be called at any time by a director of the company who is authorised to do so by the Board. In addition and subject to the provisions of the company’s MOI, which may specify a higher or lower number of directors, a Board meeting must be called if required by at least 25% of the directors (where the Board has 12 or more members), or at least 2 directors (where the Board has fewer than 12 members).

How?

Notice:  The Act provides that the form of notice to be given to directors and the notice period may be determined by the Board in its discretion. The further relevant provisions are as follows:

  • notice must be given to all directors, otherwise a Board meeting may not be convened;
  • the form and notice period for giving the notice as determined by the Board must comply with any provisions of the MOI or rules of the company dealing with Board meetings;
  • if all the directors of the company acknowledge actual receipt of the notice, are present at the meeting, or waive notice of the meeting, the meeting may proceed even if the company failed to give notice of the meeting, or if there was a defect in the giving of the notice (unless the MOI provides otherwise); and
  • where no specific time periods are prescribed in the MOI for the calling of a Board meeting, fair and reasonable notice must be given to each director.

Quorum:  The default quorum for a Board meeting is the majority of directors, unless the MOI states otherwise. If a director has a personal financial interest (i.e. a direct material interest of that person of a financial, monetary or economic nature, or to which a monetary value can be attributed) in a matter to be decided at a Board meeting, section 75(5) of the Act sets out the steps that an interested director must take in such situation, namely, the director:

  • must disclose the interest and its general nature to the Board before the matter is considered at the meeting;
  • must disclose any material information relating to the matter and known to the director to the Board;
  • may disclose any observations or pertinent insights relating to the matter to the Board if requested to do so by the other directors;
  • must leave the meeting immediately after making any relevant disclosure;
  • must not take part in the consideration of the matter; and
  • must not execute any document on behalf of the company in relation to the matter unless specifically directed to do so by the Board.

While a director is absent from a meeting due to following the above process, he / she will be regarded as being present for the purposes of determining whether a quorum is present, but will not be regarded as being present at the meeting for the purpose of determining whether a resolution has sufficient support to be adopted.

Voting:  Each director has one vote on a matter before the Board and a majority of votes cast on a resolution is sufficient to approve the resolution, except to the extent that the MOI provides otherwise. In addition, in the case of a tied vote, the chairperson of the Board will hold a casting vote only if he or she did not have or did not cast a vote initially, but in any other case, the matter being voted on will fail (unless the MOI provides otherwise).

Minutes and resolutions:  A company must keep minutes of its Board meetings in order to verify the business that was discussed and resolved at the meeting. The minutes must include every resolution adopted by the Board and any declarations given by notice or made by a director regarding the director’s financial interests in any matter. Resolutions adopted by the Board must be dated and sequentially numbered and are effective as of the date of the resolution, unless the resolution states otherwise. Every company must maintain the minutes of all meetings and resolutions of directors for a period of 7 years after the date of each meeting or the date on which the resolution was adopted. Furthermore, these records must be accessible from the company’s registered office or another location within South Africa (by filing a notice setting out the alternative location).

Electronic communication and written resolutions (round robin resolutions)

Except to the extent that the Act or MOI provides otherwise, Board meetings may be conducted by electronic communication, provided that the electronic communication allows all meeting participants to participate reasonably effectively in the meeting and to communicate concurrently with each other without an intermediary.

The Act also provides that any decision that could be voted on at a formal meeting of the Board, may instead be adopted by written consent of a majority of the directors, which consent may be given by that director in person or by electronic communication. Decisions may only be passed in this manner if every director has received notice of the matter to be decided. Such written resolutions have the same effect as if they had been approved by voting at a formal meeting of the Board.

Our highly-skilled company secretarial and corporate governance unit here at Dommisse Attorneys will be glad to assist you with any queries or assistance you may need with regard to the convening and administering of your company’s Board meetings.

35 thoughts on “Companies Act, 71 of 2008 Series Part 4: Board meetings

  1. My sister was voted off as a director of her company , she still has share but is not a director any more, is this legal she was given no reason she just attended the meeting and was told she had been voted off, she has the longest service record , please advise if this is legal?

    1. Hi Angie, directors can be removed if such director is seen to be encumbering the affairs of the company or generally not acting in the best interests of the company. Essentially, the Companies Act, 71 of 2008 (“the Act”) allows for a director to be removed in the following ways: (1) removal at shareholder level (2) removal at board level and (3) removal in accordance with the provisions of the memorandum of incorporation of the company. Please contact us on info@dommisseattorneys.co.za for more information or to make an appointment.

  2. Goodday,

    If a Company wants to dispose of its major assets may the special resolution be made via a round-robin resolution?

    Kind regards

    1. Hi Carla,

      In the case where a company wishes to dispose of all or the greater part of its assets, the disposal has to be approved by a shareholders’ special resolution for the specific transaction. Broadly speaking, shareholders’ resolutions may be adopted in one of two ways: (1) at a shareholders’ meeting or (2) written round robin resolutions. The Companies Act, 71 of 2008 (“the Act”) has brought the corporate decision making procedure in line with modern business practice by expressly allowing for adoption of resolutions by way of round robin.

      Section 60 of the Act specifically provides that a resolution that could be voted on at a shareholders’ meeting may instead be:

      • submitted for consideration to the shareholders entitled to exercise voting rights in relation to the resolution; and
      • voted on in writing by shareholders entitled to exercise voting rights in relation to the resolution within 20 business days after the resolution was submitted to them.

      If the written resolutions are supported by enough persons entitled to exercise sufficient voting rights, then the resolution is adopted and has the same effect as if it had been approved by voting at a validly called meeting. The round robin method of adopting resolutions is a valid method in most cases, except where the Act or the company’s memorandum of incorporation requires otherwise.

      You are welcome to contact our team should there be anything further you require.

  3. Good day
    The last board meeting of the company did not form a quorum. What happens if the next board meeting also doesn’t form a quorum? Do the directors present at the meeting have a right to proceed with the meeting?

    1. Hi Sylvia,

      Depending on the number of directors of the company and on whether the company’s MOI is standard or bespoke, the quorum for directors’ meetings differ.

      We would require more information about your company’s board of directors and MOI to give a concise legal opinion. Please feel free to make an appointment with us to engage and discuss further.

  4. Hi , I have changed from manual paper based board resolutions to and electronic automated system. This new system allows everything the manual process could do for my Organization. My question is the old manual system all the directors and the Company Secretary could sign the Resolution. The new electronic system allows for voting and signature (but most of my board members are not electronically equipped to sign electronically, will the voting alone meet the requirements of the Companies Act to make the resolution valid and should the resolution say a the bottom of the page that this resolution has been generated and approved electronically and meets the requirements of the Companies Act

    1. Resolution and minutes of the board resolution do not need to include wording stating that they were generated electronically – the Electronic Communications and Transactions Act 25 of 2002 provides that a data message is the functional equivalent to writing or a hard copy document. Why not give us a call and we can discuss further?

  5. Please advise if there is a rule or time limit as to when minutes of a AGM must be distributed to all shareholders .

    1. Dear Niki,

      Thank you for your query. As far as AGM’s are concerned, the Companies Act, 71 of 2008 (“the Act”) only requires a public company and a state-owned company to call an AGM within 18 months of its date of incorporation and thereafter once in every calendar year, but no more than 15 months of the date of the previous AGM to discuss very specific business and to present the audited annual financial statements to the shareholders. The company must deliver a notice of the meeting to each shareholder at least 15 business days prior to the meeting. There are no time frames stipulated for the distribution of minutes.

      The Act does not require a private company to have an AGM.  The Board is however, required to approve the annual financial statements, and these are required to be presented to the first shareholders’ meeting after they have been approved (there is no time frame stipulated), unless exempted. Private, non-profit and personal liability companies may however, elect in terms of its memorandum of incorporation to comply with the extended liability requirements of Chapter 3 of the Act (subject to certain exemptions).

      All companies are however legally required to keep at its registered office, copies of all reports presented at an AGM, notices, meeting minutes and resolutions for a period of seven years. Shareholders always have the right to request access to and copy any of these records, should the need arise.

      You are welcome to contact us should you have any further queries.

  6. When a member of the board is absent from the meeting and quantum is not met. Is it procedural to put the absent member on call and regard him as present?

    Regards

    1. Thank you for your query. We will need additional information from you to adequately respond. Kindly call us on 021 6711550 to set up a time to chat.

  7. Hi
    My father passed away last year and we are now wrapping up his Estate .
    We have received a claim against the estate from his business partner who has provided an unsigned copy of the minutes from a meeting almost two years ago as evidence of this claim
    Are these minutes legal and binding

    1. Thank you for your query. We will need additional information from you to adequately respond. Kindly call us on 021 6711550 to set up a time to chat.

  8. Good day
    My business partner and I just registered a new (Pty) Ltd business. We are equal shareholders and the only 2 directors in the business. Which resolutions should we have in place and what other legal documents do we need?

    1. Thank you for your query. There are a number of documents you will require. We have an experienced CoSec team that could assist seemlessly. Kindly call us on 021 6711550 to set up a meeting.

  9. Our company has always pasted our minutes and resolutions in a minutes book but would like to change and only file these in a lever arch file. Can we do this, or is there any Act this indicates that you can’t

    1. Hi Patrisia,

      Thank you for your comment. There is no requirement relating to the format in which minutes and resolutions must be kept. In terms of the Companies Act of 1973, there were very specific provisions regarding the keeping of minutes (for example it must be in written form and recorded in a bound book with consecutively numbered pages), but it is now much simpler under the current Companies Act of 2008. All company records may be maintained in any form (even electronic format) provided that they can be converted into written form within a reasonable time. Please feel free to contact us on info@dommisseattorneys.co.za should you have any further queries.

      Thank you.

  10. Can a company force you to sign a restrain of trade agreement after being employed with them for three years and you are only in a junior position

    1. Dear Paul,

      Thank you for your comment. In terms of section 73(4) of the Companies Act, 71 of 2008 (“the Act”), the board of the company may determine the form and time for giving notice of its meetings, subject to the memorandum of incorporation of the company and the notice requirements having been met. In addition, section 73(3) of the Act allows board meetings to be conducted entirely by electronic communication, provided that the facility employed allows for all persons participating in that meeting to communicate concurrently with each other without any intermediary and to participate effectively in the meeting.

      Hope the above answers your question. You are welcome to contact us should you have any further queries or concerns.

      Kind regards,
      Ya-fan

  11. Good day to you all.
    What is the different between the notice of the meeting and minute of the meeting.

    Kind regards

    1. Good day John,

      In the context of board meetings, “notice of a meeting” refers to the notice that must be given to all directors in order to convene a meeting. The Companies Act, 71 of 2008 (“the Compnaies Act”) together with the company’s MOI, sets out the notice requirements that must be met when calling a meeting. “Minutes of a meeting” refers to the record of the meeting that must be kept in order to verify the business that was discussed and resolved at the meeting. The Companies Act also sets out various requirements that must be met in this regard. You are welcome to contact us should you have any further queries or concerns.

      Thank you.

  12. Could I please know the legal effect of not dating and sequentially numbering a board resolution signed in South Africa for use outside South Africa? Would the resolution be void? Furthermore where a company say, XYZ (Pty) Limited, carries on business or executes a document as XYZ without the addition of ‘PTY Limited’, would the document be deemed to have been validly executed.

    1. Good day Adekunle,

      Previously, the Companies Act of 1973 had very specific provisions regarding the keeping of minutes, i.e. that they had to be in written form and recorded in a bound book with consecutively numbered pages. However, this has changed to be simpler. In terms of the current Companies Act it is now possible for minutes to be maintained in electronic format. Section 24 permits a company to maintain records in any form provided that the minutes can be converted into written form within a reasonable time. Although there is no requirement relating to the form in which minutes must be kept, we advise that your company has an internal process with regard to documenting the proceedings of meetings, in order to ensure that there is an adequate record and aligned with best practice. You are welcome to contact us should you have any further queries or concerns.

      Thank you.

  13. Morning! can you assist on the matter of a Member of an HOA wishing to attend an HOA Board meeting please? I am the Manager of an Estate [housing complex] – there is nothing within our Articles of Assoc or MOI to condone this.
    The Member claims she has the right to do so, and that ‘it is enshrined within company law, all members have a right to attend any and all board meetings’.
    an answer would be much appreciated and thanking you in advance.

    1. Good day Suzanne,

      You would have to refer to the governance document of the HOA. If the HOA is a common law association, the governance document would be the constitution (which falls outside the scope of the Companies Act). If the HOA is structured as a non-profit company, then you may turn to the MOI (and the Companies Act) for guidance. Is there a particular reason why the member should not be allowed to attend the board meeting? Generally speaking, there is nothing to prevent the member from attending the meeting, but such member will not be able to vote at the meeting at board level. Just bear in mind that the board is legally required to keep a proper record of the minutes of the meeting so even if the member concerened does not attend the meeting, he will be entitled to request for the minutes of the meeting which should fully disclose the agenda and any decisions made.

      Thank you.

  14. Good afternoon, I hope someone is able to assist. As part of my divorce I have agreed to sign back 49% of my “shares” in 2 separate companies back to my former husband. I received a document that is back dated to 2014. of a Waver. I do not think that I should sign a document that is back dated and it does not state what I waver. Can someone please explain in short the process that needs to follow to sign back the shares in the 2 separate cc’s. Much appreciated.

    1. Hi Naome,

      Was the transaction supposed to have taken place in 2014 and have the necessary documents (other than the waiver) been implemented? Also can you please confirm whether the transaction is structured as a company buy-back (the company gets the shares) or as a share transfer (your husband gets the shares)?

      Assuming that we are dealing with a share transfer, then such transfer must comply with the Companies Act and includes (i) the transfer by the existing shareholder to the new shareholder of his rights in and to the shares (which must be evidenced by a proper instrument of transfer), (ii) the registering of the new shareholder in the company’s share register as a shareholder in the company and (iii) the issuing of a share certificate to the new shareholder. Are you in possession of these documents?

      Waivers usually apply in the case where a company has numerous shareholders and each shareholder waives his/her pre-emptive right to purchase the shares, forming the subject matter of the sale transaction.

      We will need more information to offer any form of meaningful advice. You are welcome to contact us to set up a consultation. Looking forward to assisting you further.

  15. Is a round robin meeting legal if the board of directors did not approve that it may be held? We are a retirement village which is registered as a NPC company where the developer called for a round robin meeting with the owners/members without having it approved or even advising the full board of directors, thereof, prior to circulating the round robin voting notification and voting documentation. The developer holds 50%representation on the board of directors. As such the 50% of the developers directors supported the round robin vote, whilst the other 50% of the directors were not advised of the intention to have a round robin meeting and do not support the round robin vote.

    1. Hi Gerrie,

      Broadly speaking, resolutions of the board of directors may be adopted in one of two ways: (i) at a meeting by way of a vote or (ii) written round robin resolutions (in which case, a physical meeting does not need to be held). For decisions to be passed by round-robin resolution, every director still needs to receive notice of the matter to be decided.

      Round robin resolutions can be done, for example, by circulating the written resolutions by way of e-mail and then allowing them to be signed in counterparts. If the written resolutions are supported by enough persons entitled to exercise sufficient voting rights (i.e. majority of directors), then the resolution is adopted and has the same effect as if it had been approved by voting at a validly called meeting. In your case, the votes are split 50/50 so its seems that the necessry majority to support the resolution has not be obtained.

      The round robin method of adopting resolutions is a valid method in most cases, except where the Companies Act or the company’s memorandum of incorporation requires otherwise. One such exception is that any business of the company to be conducted at the annual general meeting of the company may not be done by way of round robin.

      You are welcome to contact us should you have any further queries in this regard.

  16. Good day, is it legal for board to sign off Minutes of the previous AGM before the next AGM for an Non-Profit Company? Is it possible for the organisation to distribute 2 copies of the Minutes of the AGM bearing different dates?

    1. Hi A.S Kotze,

      Thank you for your query. A private limited liability company would definitely be the most suitable structure for the purposes of seeking investment in return for equity. This is because a CC has no share capital so to speak and therefore no shareholders. The owners of a CC are the members of the CC and those members have a membership interest in the CC.

      Upon application for the CC to be converted into a private company, an MOI will need to be filed with the CIPC, which shall have the effect of, amongst other things, establishing the necessary authorised share capital, which then creates the units in terms of which an ownership interest in the company can be subscribed for and divided.

      In terms of the Companies Act, 71 of 2008, shares authorised in terms of the MOI can only be no par value shares. Any issue of such shares have no par value and the board of directors must determine the price or other adequate consideration at which such shares may be issued.

      You are welcome to contact us should you need further assistance.

  17. Hi there,

    If a company has only one director, what are the Companies Act requirements regarding board meetings and AGMs?

    1. Hi Olivia,

      Thank you for your query. In terms of section 57(3) of the Companies Act, 71 of 2008, if a profit company has only one director, then that director may exercise any power or perform any function of the board at any time, without notice or compliance with any other internal formalities, except to the extent that the company’s Memorandum of Incorporation provides otherwise, and sections 71(3) to 71(7), 73 and 74 of the Companies Act do not apply to the governance of that company.

      You are welcome to contact us should you need any further legal assistance.

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